Are Canadians making the most out of the Canadian Pension Program?

Canadians planning for retirement have likely heard of the Canadian Pension Program (CPP), one of the country’s most robust tools to help residents pay for retirement. But are Canadians making the most out of the program?

There are a few things to consider when planning for your CPP income and some tips to help you maximize the benefits. Let’s look at the CPP, one potential mistake you don’t want to make when claiming benefits, and other ways to maximize your CPP pension payments.

What is the Canadian Pension Program?

The Canadian Pension Program, or CPP, is a contributory, earnings-related program that ensures all Canadian workers, except those in Quebec (who participate in the Quebec Pension Plan), have the opportunity to save for retirement.¹ The amount you receive in retirement is directly linked to the contributions made over your career and when you choose to begin drawing your pension.

Doubling Your CPP by Waiting Until 70

One of the most powerful strategies to maximize your CPP benefits is to delay receiving them until age 70.

According to a report from the National Institute on Aging, waiting until age 70 to start claiming CPP payments would more than double your monthly pension compared with if you start collecting CPP payments at age 60.² This means that a Canadian with a median CPP income and average life expectancy could lose out on more than $100,000 worth of income by taking CPP payments at age 60 versus 70.³

However, nine out of ten Canadians opt to take their CPP benefits by age 65 or earlier.⁴ With retirement costs increasing, it’s essential to consider when you take your CPP income and maximize it to its full potential.

How Canadians Can Maximize Their CPP Benefits

While every Canadian’s retirement plan is different, there are several ways to ensure you’re getting the most from the CPP:

Consider Delaying Payments: As mentioned, delaying CPP until age 70 can increase your monthly benefits significantly.
Understand Contribution Rules: The more you contribute to your working life, the higher your potential benefits. For self-employed individuals, contributing both the employer and employee portions can lead to higher payouts.
Coordinate with Other Income Sources: CPP is a part of a well-rounded retirement plan. Combined with Old Age Security (OAS), private pensions, and personal savings, it helps build the foundation for a financially secure retirement.
Plan for Your Unique Retirement Needs: There’s no one-size-fits-all approach to retirement planning. Some people might choose to start CPP earlier to cover immediate expenses, while others delay it for long-term benefits. The decision should be based on your personal situation and should take into consideration your income and expenses.

The key to making the most of the CPP is personalized planning. Taking the time to assess your financial situation, consider your health, and explore other sources of income can help you make an informed decision. While delaying payments can significantly boost your retirement income, starting earlier may be more beneficial for those who need immediate financial support or want to enjoy their retirement sooner.

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.